"Sufficient Cause" for Setting Aside Ex-Parte Decree : The Law

P. Sathasivam

The Supreme Court in its Judgment Parimal v. Veena @ Bharti has examined the provisions of Order IX Rule 13 of the Code of Civil Procedure, 1908. Order IX Rule 13 of the CPC speaks of conditions under which an Ex-Parte Decree can be set aside. While examining the various judicial precedents on the provision, the Court held as under;

7. Order IX, R.13 CPC:

The aforesaid provisions read as under:

"Setting aside decree ex-parte against defendant In any case in which a decree is passed ex-parte against a defendant, he may apply to the Court by which the de- cree was passed for an order to set it aside; and if he sat- isfies the Court that the summons was not duly served, or that he was prevented by any sufficient cause from appearing when the suit was called on for hearing, the Court shall make an order setting aside the decree as against him upon such terms as to costs, payment into Court or otherwise as it thinks fit, and shall appoint a day for proceeding with the suit; xx xx xx Provided further that no Court shall set aside a decree passed ex-parte merely on the ground that there has been an irregularity in the service of summons, if it is satisfied that the defendant had notice of the date of hearing and had sufficient time to appear and answer the plaintiff's claim.

xx xx xx" (Emphasis added)

8. It is evident from the above that an ex-parte decree against a defendant has to be set aside if the party satisfies the Court that summons had not been duly served or he was prevented by sufficient cause from appearing when the suit was called on for hearing. However, the court shall not set aside the said decree on mere irregularity in the service of summons or in a case where the defendant had notice of the date and sufficient time to appear in the court.

The legislature in its wisdom, made the second proviso, mandatory in nature. Thus, it is not permissible for the court to allow the application in utter disregard of the terms and conditions incorporated in the second proviso herein.

9. "Sufficient Cause" is an expression which has been used in large number of Statutes. The meaning of the word "sufficient" is "adequate" or "enough", in as much as may be necessary to answer the purpose intended. Therefore, word "sufficient" embraces no more than that which provides a platitude which when the act done suffices to accomplish the purpose intended in the facts and circumstances existing in a case and duly examined from the view point of a reasonable standard of a cautious man. In this context, "sufficient cause" means that party had not acted in a negligent manner or there was a want of bona fide on its part in view of the facts and circumstances of a case or the party cannot be alleged to have been "not acting diligently" or "remaining inactive". However, the facts and circumstances of each case must afford sufficient ground to enable the Court concerned to exercise discretion for the reason that whenever the court exercises discretion, it has to be exercised judiciously. (Vide: Ramlal & Ors. v. Rewa Coalfields Ltd., AIR 1962 SC 361; Sarpanch, Lonand Grampanchayat v. Ramgiri Gosavi & Anr., AIR 1968 SC 222; Surinder Singh Sibia v. Vijay Kumar Sood, AIR 1992 SC 1540; and Oriental Aroma Chemical Industries Limited v. Gujarat Industrial Development Corporation & Another, (2010) 5 SCC 459)

10. In Arjun Singh v. Mohindra Kumar & Ors., AIR 1964 SC 993, this Court observed that every good cause is a sufficient cause and must offer an explanation for non-appearance. The only difference between a "good cause" and "sufficient cause" is that the requirement of a good cause is complied with on a lesser degree of proof than that of a "sufficient cause". (See also: Brij Indar Singh v. Lala Kanshi Ram & Ors., AIR 1917 P.C. 156; Manindra Land and Building Corporation Ltd. v. Bhutnath Banerjee & Ors., AIR 1964 SC 1336; and Mata Din v. A. Narayanan, AIR 1970 SC 1953).

11. While deciding whether there is a sufficient case or not, the court must bear in mind the object of doing substantial justice to all the parties concerned and that the technicalities of the law should not prevent the court from doing substantial justice and doing away the illegality perpetuated on the basis of the judgment impugned before it. (Vide: State of Bihar & Ors. v. Kameshwar Prasad Singh & Anr., AIR 2000 SC 2306; Madanlal v. Shyamlal, AIR 2002 SC 100; Davinder Pal Sehgal & Anr. v. M/s. Partap Steel Rolling Mills (P) Ltd. & Ors., AIR 2002 SC 451; Ram Nath Sao alias Ram Nath Sao & Ors. v. Gobardhan Sao & Ors., AIR 2002 SC 1201; Kaushalya Devi v. Prem Chand & Anr. (2005) 10 SCC 127; Srei International Finance Ltd., v. Fair growth Financial Services Ltd. & Anr., (2005) 13 SCC 95; and Reena Sadh v. Anjana Enterprises, AIR 2008 SC 2054).

12. In order to determine the application under Order IX, Rule 13 CPC, the test has to be applied is whether the defendant honestly and sincerely intended to remain present when the suit was called on for hearing and did his best to do so. Sufficient cause is thus the cause for which the defendant could not be blamed for his absence. Therefore, the applicant must approach the court with a reasonable defence. Sufficient cause is a question of fact and the court has to exercise its discretion in the varied and special circumstances in the case at hand. There cannot be a strait-jacket formula of universal application. 

The Judgment further goes on to examine the Presumption of Service by Registered Post, and observes as under;

PRESUMPTION OF SERVICE BY REGISTERED POST & BURDEN OF PROOF:

13. This Court after considering large number of its earlier judgments in Greater Mohali Area Development Authority & Ors. v. Manju Jain & Ors., AIR 2010 SC 3817, held that in view of the provisions of Section 114 Illustration (f) of the Evidence Act, 1872 and Section 27 of the General Clauses Act, 1897 there is a presumption that the addressee has received the letter sent by registered post. However, the presumption is rebuttable on a consideration of evidence of impeccable character. A similar view has been reiterated by this Court in Dr. Sunil Kumar Sambhudayal Gupta & Ors. v. State of Maharashtra, JT 2010 (12) SC 287.

14. In Gujarat Electricity Board & Anr. v. Atmaram Sungomal Poshani, AIR 1989 SC 1433, this Court held as under: "There is presumption of service of a letter sent under registered cover, if the same is returned back with a postal endorsement that the addressee refused to accept the same. No doubt the presumption is rebuttable and it is open to the party concerned to place evidence before the Court to rebut the presumption by showing that the address mentioned on the cover was incorrect or that the postal authorities never tendered the registered letter to him or that there was no occasion for him to refuse the same. The burden to rebut the presumption lies on the party, challenging the factum of service."

(Emphasis added)

15. The provisions of Section 101 of the Evidence Act provide that the burden of proof of the facts rests on the party who substantially asserts it and not on the party who denies it. In fact, burden of proof means that a party has to prove an allegation before he is entitled to a judgment in his favour. Section 103 provides that burden of proof as to any particular fact lies on that person who wishes the court to believe in its existence, unless it is provided by any special law that the proof of that fact shall lie on any particular person. The provision of Section 103 amplifies the general rule of Section 101 that the burden of proof lies on the person who asserts the affirmative of the facts in issue.

'Inquiry' under the SICA : The Law

B.D. Ahmed

The Delhi High Court in a recent decision, in Dwarikadhish Spinners Ltd. v. UCO Bank & Ors., has examined the scope and nature of inquiry under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. In the case at hand, the question raised before the Hon'ble court was whether a unilateral inquiry could be conducted by any creditor, not being an operating agency under the act, and whether such inquiry / report can be relied upon by the BIFR without independent application of mind. The Court held as under;

We find that as per the statement of objects and reasons of SICA, it has been designed to take care of not only those sick industrial companies which are potentially viable and can be revived and rehabilitated but also of the non- viable sick industrial companies. The potentially viable sick industrial companies are sought to be revived and rehabilitated under SICA whereas the non-viable sick industrial companies are to be dealt with under Section 20 of SICA in order to salvage the productive assets and realize the amounts due to the banks and financial institutions through liquidation of such companies. Before either eventuality is undertaken, the BIFR has been given the duty under the Act to determine whether an industrial company has become a sick industrial company or not. The expression sick industrial company is defined in Section 3(1)(o) as under:

"sick industrial company" means an industrial company (being a company registered for not less than five years) which has at the end of any financial year accumulated losses equal to or

exceeding its entire net worth."

It is apparent from the above definition that an industrial company, which has, at the end of any financial year, accumulated losses equal to or exceeding the entire net worth of the company would be termed as a sick industrial company. When an industrial company becomes sick, a duty is cast upon the Board of Directors of that company under Section 15(1) to, within sixty days from the date of finalization of the duly audited accounts of the company for the financial year as at the end of which the company has become sick industrial company, make a reference to BIFR for determination of the measures which are to be adopted in respect of the said company. We find that by virtue of Section 15(2), the Central Government or the Reserve Bank or a State Government or a public financial institution or a State level institution or a scheduled bank may, without prejudice to the requirement of the Board of Directors of an industrial company which has become sick to make a reference to the BIFR within Section 15(1), can also make a reference in respect of a company in respect of which there are sufficient reasons to believe that it has become a sick industrial company. Thus, it is clear that a reference to BIFR can be made either by the Board of Directors of the company itself or by the Central Government, RBI etc. under Section 15(2).

10. Section 16 is of material significance and, as such, it would be appropriate to set out the same:-

"16. INQUIRY INTO WORKING OF SICK INDUSTRIAL COMPANIES.

(1) The Board may make such inquiry as it may deem fit for determining whether any industrial company has become a sick industrial company -

(a) upon receipt of a reference with respect to such company under section 15; or

(b) upon information received with respect to such company or upon its own knowledge

as to the financial condition of the company.

(2) The Board may, if it deems necessary or expedient so to do for the expeditious disposal of

an inquiry under sub-section (1), require by order any operating agency to enquire into and make a report with respect to such matter as may be specified in the order.

(3) The Board or, as the case may be the operating agency shall complete its inquiry as expeditiously as possible and endeavour shall be made to complete the inquiry within sixty days from the commencement of the inquiry.

Explanation: For the purposes of this sub section, an inquiry shall be deemed to have commenced upon the receipt by the Board of any reference or information or upon its own knowledge reduced to writing by the Board.

(4) Where the Board deems it fit to make an inquiry or to cause an inquiry to be made into any industrial company under sub-section (1) or, as the case may be, under sub-section (2), it may appoint one or more persons to be a special director or special directors of the company for safeguarding the financial and other interests of the company or in the public interest.

(4A) The Board may issue such directions to a special director appointed under sub-section (4) as it may deem necessary or expedient for proper discharge of his duties.

(5) The appointment of a special director referred to in sub-section (4) shall be valid and effective notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956) or in any other law for the time being in force or in the memorandum and articles of association or any other instrument relating to the industrial company, and any provision regarding share qualification, age limit, number of directorships, removal from office of directors and such like conditions contained in any such law or instrument aforesaid, shall not

apply to any director appointed by the Board.

(6) Any special director appointed under sub- section (4) shall -

(a) hold office during, the pleasure of the Board and may be removed or substituted by any person by order in writing by the Board;

(b) not incur any obligation or liability by reason only of his being a director or for anything done or omitted to be done in good faith in the discharge of his duties as a director or anything in relation thereto;

(c) not be liable to retirement by rotation and shall not be taken into account for computing the number of directors liable to such retirement;

(d) not be liable to be prosecuted under any law for anything, done or omitted to be done in good faith in the discharge of his duties in relation to the sick industrial company."

11. A plain reading of Section 16(1) of SICA would indicate that the prime duty of the BIFR in making an inquiry is for the purpose of determining whether an industrial company has become a sick industrial company or not. Of course, sub-section (1) of Section 16 has two parts. Clause (a) of Section 16(1) refers to a situation where the Board embarks upon an inquiry upon receipt of a reference under Section 15 of SICA. We may recall that the reference under Section 15 may be made either at the instance of the Board of Directors of the company which purports to be a sick industrial company or under Section 15(2) at the instance of the Central Government, Reserve Bank etc. where such institution has sufficient reasons to believe that an industrial company has become a sick industrial company. Clause (b) of Section 16(1) contemplates an inquiry in a situation where the BIFR undertakes such inquiry upon information received with respect to a company or upon its own knowledge as to the financial condition of such a company. In either eventuality, that is, either upon receipt of a reference or upon information, the BIFR has to make an inquiry for determining whether the industrial company in question has become a sick industrial company or not. Of course, the type and kind of inquiry that the BIFR has to make has been left to the BIFR, inasmuch as the expression used is :- "the Board may make such inquiry as it may deem fit".

12. By virtue of sub-section (2) of Section 16 of SICA, in cases where the BIFR deems it necessary or expedient so to do for the expeditious disposal of an inquiry under Section 16(1), the BIFR may require an operating agency to inquire into and make a report with respect to such matters as may be specified in the orders passed by the BIFR in this regard. At this juncture we would like to point out that the definition of "operating agency" given in Section 3(1)(i) is as follows:

"(i) "operating agency" means any public financial institution, State level institution, scheduled bank or any other person as may be specified by general or special order as its agency by the Board;"

In other words, the operating agency has to be appointed by the BIFR by a general or a special order as its agent for the purposes of making a report. We may also mention that by virtue of Section 16(3), it is apparent that all endeavours are to be made to complete the inquiry as expeditiously as possible and within a period of sixty days from the commencement of the inquiry. The explanation to Section 16(3) makes it clear that an inquiry is deemed to commence upon the receipt by the Board of a reference or upon its own knowledge reduced to writing by the Board.

13. In the present case since a reference has been made by the Board of Directors of the petitioner company under Section 15(1), the inquiry would be deemed to have commenced on the date on which the reference was received, that is, on 12.07.2005. Consequently, if we were to strictly comply with the provisions of Section 16(3) of SICA, the BIFR should have endeavoured to complete the inquiry within sixty days thereof, but unfortunately that did not happen and even the first date on which the petitioners reference was taken up by the Board was much later, on 22.03.2006. Anyhow, that is another aspect of the matter with which we are not concerned in this writ petition.

14. It is clear from the above resume with regard to the provisions of Section 16 of SICA that it is incumbent upon the BIFR to conduct an inquiry for the purpose of determining whether the industrial company has become a sick industrial company or not. Such inquiry has to be conducted upon receipt of a reference under Section 15 or upon information received by the BIFR. The inquiry has to be conducted by the BIFR itself, but as provided under Section 16(2), where it is necessary for expeditious disposal of an inquiry and where the BIFR deems it expedient to do so, the BIFR may appoint an operating agency and require it to inquire into and make a report with respect to the matters which may be specified in the order. In any event, whether the inquiry is conducted by the Board itself or through an operating agency, it is imperative that once a reference is received, such an inquiry has to be conducted for determining whether the industrial company has become a sick industrial company or not. It is not open to the BIFR to reject a reference without returning a finding as to whether the company in question has become a sick industrial company or not.

15. What has been stated by us is also borne out in Chapter IV of the Board of Industrial and Financial Reconstruction Regulations, 1987 (hereinafter referred to as the "said regulations"). The said Chapter IV deals with inquiries under Section 16. Regulation 21 specifically provides that upon a reference with respect to an industrial company under Section 15 or upon information received with respect to such company or upon its own knowledge as to the financial condition of the company, the BIFR may either itself make such inquiry, as it may deem fit, for determining whether the company in question has become a sick industrial company or if it deems it necessary or expedient so to do, for the expeditious disposal of the said inquiry, direct by an order, an operating agency, to be specified in the order, to inquire into and make a report in respect of such matters as may be specified in the said order. By virtue of Regulation 22 the BIFR may also direct the operating agency to make a further inquiry if deemed necessary.

16. Regulation 24 is important. It reads as under:- "24. Where the Board after completion of its inquiry or after considering the report or, as the case may be, the further report of the operating agency, is satisfied that no case exists for coming to the conclusion that the industrial company has become a sick industrial company, it shall drop further proceedings in the reference."

It is clear that as per the said Regulation 24 also two situations are contemplated (1) completion of the inquiry by the Board itself or (2) after considering the report of the operating agency or further report of the operating agency, as the case may be. Regulation 24 makes it clear that upon either of the two eventualities, if the BIFR is satisfied that no case exists for coming to the conclusion that industrial company has become a sick industrial company, it shall drop further proceedings in the reference. This regulation also makes it clear that it is imperative for the BIFR to record its satisfaction with regard to the question as to whether the concerned company has become a sick industrial company or not. If the satisfaction recorded indicates that the company in question is not a sick industrial company then further proceedings in the reference are to be dropped. If, on the other hand, the BIFR comes to the conclusion and is satisfied that the company in question has become a sick industrial company, it would then, as mentioned above, have to determine as to whether the said company is one which has potential for revival and rehabilitation or one where revival is not a viable option. We have already pointed out the courses that would be followed in either eventuality.

17. The learned counsel for the respondents had referred to Regulation 40 in order to submit that it is open to the BIFR to take assistance of public financial institutions, banks, other institutions, consultants, experts, chartered accountants etc. in furtherance of its functions. They placed reliance on Regulation 40 for the proposition that the IA report submitted by M/s ANG and Associates would fall within such assistance as contemplated under this Regulation. Consequently, it was submitted that the Board committed no error in relying upon the IA report in so far as the petitioner company is concerned. Regulation 40 reads as under:

"Assistance to the Board. The Board may, at any time, take the assistance of public financial institutions, banks or other institutions, consultants, experts, chartered accountants, surveyors and such other technical and professional persons as it may consider necessary and ask them to submit report or furnish any information.

Provided that if the report or information so obtained or any part thereof is brought on record of any inquiry and is proposed to be relied upon by the Board for forming its opinion or view, the party or parties to the inquiry shall be given a reasonable opportunity of making his or their submissions with respect thereto."

One thing that immediately strikes us is that the assistance that is spoken of in Regulation 40 is invited at the instance of the BIFR. The language is clear, inasmuch as it contemplates that the BIFR may ask any of the said institutions, consultants, chartered accountants etc. to submit a report or furnish information. The occasion for the BIFR to do so would arise only after it commences an inquiry. As we have noticed above, the inquiry commenced, in this case, on 12.07.2005, the date on which the reference received by the BIFR. Therefore, the assistance that is contemplated in Regulation 40 is one which would be sought after the commencement of the inquiry by the BIFR and not some pre-existing report.

18. Having surveyed the various statutory provisions as well as the applicable regulations, we are of the clear view that the BIFR, once it receives a reference from the Board of Directors of the company, is duty bound to determine as to whether the company has become a sick industrial company or not. In the present case, we find that he BIFR did not return any such finding either way. All that the BIFR did was to reject the reference on the plea that the petitioner company had not approached the BIFR with clean hands, inasmuch as there were serious allegations in the IA report submitted by M/s ANG and Associates. The BIFR also rejected the reference on the ground that no reply to the IA report had been submitted by the petitioner company despite repeated opportunities. We are of the view that this approach is not in consonance with the law. Irrespective of the alleged conduct of the petitioner company, once a reference is received by the BIFR it has to make an inquiry for determining whether the company in question has become a sick industrial company or not. In the present case, we find that no such inquiry, as contemplated under Section 16 of the SICA, was embarked upon by the BIFR. On the contrary, BIFR, in fact, did not give any finding in so far as the IA report in respect of the petitioner company is concerned.

Dowry Death - Meaning : Supreme Court explains

Justice Lodha

We have dealt with various posts, relating to the Law of Dowry in India. The Supreme Court in Satya Narain Tiwari @ Jolly v. State of UP went to the extent of observing that Bride Burning cases should be treated as 'rarest of the rare'. In a recent case of Bachni Devi v. State of Haryana, Justice R.M. Lodha examined the relevant provisions of S. 304 B of the IPC, as under;

11. Section 304B was inserted in IPC with effect from November 19, 1986 by the Dowry Prohibition (Amendment) Act, 1986 (for short, `(Amendment) Act, 1986'). Thereby substantive offence relating to `dowry death' was introduced in the IPC. Section 304-B IPC reads as follows :

"304B. Dowry death.--(1) Where the death of a woman is caused by any burns or bodily injury or occurs otherwise than under normal circumstances within seven years of her marriage and it is shown that soon before her death she was subjected to cruelty or harassment by her husband or any relative of her husband for, or in connection with, any demand for dowry, such death shall be called "dowry death", and such husband or relative shall be deemed to have caused her death.

Explanation.- For the purposes of this sub- section," dowry" shall have the same meaning as in section 2 of the Dowry Prohibition Act, 1961 (28 of 1961 ).

(2) Whoever commits dowry death shall be punished with imprisonment for a term which shall not be less than seven years but which may extend to imprisonment for life."

12. For making out an offence of `dowry death' under Section 304B, the following ingredients have to be proved by the prosecution:

(a) death of a woman must have been caused by any burns or bodily injury or her death must have occurred otherwise than under normal circumstances;

(b) such death must have occurred within seven years of her marriage;

(c) soon before her death, she must have been subjected to cruelty or harassment by her husband or any relative of her husband; and

(d) such cruelty or harassment must be in connection with the demand for dowry.

13. Pertinently, for the purposes of Section 304B IPC, `dowry' has the same meaning as in Section 2 of the Dowry Prohibition Act, 1961 (for short, `1961 Act').

14. Section 2 of the 1961 Act defines `Dowry' as follows:

"2. Definition of `dowry'.- "Dowry" means any property or valuable security given or agreed to be given either directly or indirectly--

(a) By one party to a marriage to the other party to the marriage; or

(b) By the parent of either party to a marriage or by any other person to either party to the marriage or to any other person, at or before or any time after the marriage in connection with the marriage of the said parties, but does not include dower or mahr in the case of persons to whom the Muslim Personal Law (Shariat) applies.

Explanation I--............(Omitted).

Explanation II--The expression "valuable security" has the same meaning as in section 30 of the Indian Penal Code (45 of 1860)."

15. 1961 Act was enacted to prohibit the giving or taking of `dowry' and for the protection of married woman against cruelty and violence in the matrimonial home by the husband and in-laws. The mere demand for `dowry' before marriage, at the time of marriage or any time after the marriage is an offence. 1961 Act has been amended by the Parliament on more than one occasion and by the (Amendment) Act, 1986, Parliament brought in stringent provisions and provided for offence relating to `dowry death'. The amendments became imperative as the dowry deaths continued to increase to disturbing proportions and the existing provisions in 1961 Act were found inadequate in dealing with the problems of dowry deaths. The definition of `dowry' reproduced above would show that the term is defined comprehensively to include properties of all sorts as it takes within its fold `any property or valuable security' given or agreed to be given in connection with marriage either directly or indirectly. In S. Gopal Reddy v. State of A.P. , this Court stated as follows : "9. The definition of the term `dowry' under Section 2 of the Act shows that any property or valuable security given or "agreed to be given" either directly or indirectly by one party to the marriage to the other party to the marriage "at or before or after the marriage" as a "consideration for the marriage of the said parties" would become `dowry' punishable under the Act. Property or valuable security so as to constitute `dowry' within the meaning of the Act must therefore be given or demanded "as consideration for the marriage".

11. The definition of the expression `dowry' contained in Section 2 of the Act cannot be confined merely to the `demand' of money, property or valuable security "made at or after the performance of marriage" as is urged by Mr Rao. The legislature has in its wisdom while providing for the definition of `dowry' emphasised that any money, property or valuable security given, as a consideration for marriage, "before, at or after" the marriage would be covered by the expression `dowry' and this definition as contained in Section 2 has to be read wherever the expression `dowry' occurs in the Act. Meaning of the expression `dowry' as commonly used and understood is different than the peculiar definition thereof under the Act. Under Section 4 of the Act, mere demand of `dowry' is sufficient to bring home the offence to an accused. Thus, any `demand' of money, property or valuable security made from the bride or her parents or other relatives by the bridegroom or his parents or other relatives or vice versa would fall within the mischief of `dowry' under the Act where such demand is not properly referable to any legally recognised claim and is relatable only to the consideration of marriage. Marriage in this context would include a proposed marriage also more particularly where the non- fulfilment of the "demand of dowry" leads to the ugly consequence of the marriage not taking place at all. The expression `dowry' under the Act must be interpreted in the sense which the statute wishes to attribute to it...............The definition given in the statute is the determinative factor. The Act is a piece of social legislation which aims to check the growing menace of the social evil of dowry and it makes punishable not only the actual receiving of dowry but also the very demand of dowry made before or at the time or after the marriage where such demand is referable to the consideration of marriage. Dowry as a quid pro quo for marriage is prohibited .......... .".

16. While dealing with the term `dowry' in Section 304B IPC, this Court in the case of Kamesh Panjiyar @ Kamlesh Panjiyar v. State of Bihar held as under : "14. The word "dowry" in Section 304-B IPC has to be understood as it is defined in Section 2 of the Dowry Act. Thus, there are three occasions related to dowry. One is before the marriage, second is at the time of marriage and the third "at any time" after the marriage. The third occasion may appear to be unending period. But the crucial words are "in connection with the marriage of the said parties". As was observed in the said case "suicidal death" of a married woman within seven years of her marriage is covered by the expression "death of a woman is caused ... or occurs otherwise than under normal circumstances" as expressed in Section 304-B IPC."

SARFAESI Act - Scope of S. 17 : Supreme Court Explains

Justice D K Jain

The Supreme Court in Kanaiyalal Lalchand Sachdev & Ors. v. State of Maharashtra & Ors. has examined the scope of S. 17 vis-a-vis S. 13 & 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act ("SARFAESI Act"). The Supreme  Court, while dealing with the relevant provisions of the statute, have held as under;

16. Section 13 of the Act deals with enforcement of security interest, providing that notwithstanding anything contained in Sections 69 or 69A of the Transfer of Property Act, 1882, any security interest created in favour of any secured creditor may be enforced, without the court's intervention, by such creditor in accordance with the provisions of the Act. Section 13(2) of the Act provides that when a borrower, who is under a liability to a secured creditor, makes any default in repayment of secured debt, and his account in respect of such debt is classified as non- performing asset, then the secured creditor may require the borrower, by notice in writing, to discharge his liabilities within sixty days from the date of the notice, failing which the secured creditor shall be entitled to exercise all or any of the rights given in Section 13(4) of the Act. Section 13(3) of the Act provides that the notice under Section 13(2) of the Act shall give details of the amount payable by the borrower as also the details of the secured assets intended to be enforced by the bank. Section 13(3-A) of the Act was inserted by Act 30 of 2004 after the decision of this Court in Mardia Chemicals (supra), and provides for a last opportunity for the borrower to make a representation to the secured creditor against the classification of his account as a non-performing asset. The secured creditor is required to consider the representation of the borrowers, and if the secured creditor comes to the conclusion that the representation is not tenable or acceptable, then he must communicate, within one week of the receipt of the communication by the borrower, the reasons for rejecting the same. Section 13(4) of the Act provides that if the borrower fails to discharge his liability within the period specified in Section 13(2), then the secured creditor, may take recourse to any of the following actions, to recover his debt, namely- 

"(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;

(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset:

Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt: Provided further that where the management of whole, of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt; 

(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;

(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt."

Section 14 of the Act provides that the secured creditor can file an application before the Chief Metropolitan Magistrate or the District Magistrate, within whose jurisdiction, the secured asset or other documents relating thereto are found for taking possession thereof. If any such request is made, the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, is obliged to take possession of such asset or document and forward the same to the secured creditor. (See: United Bank of India Vs. Satyawati Tondon & Ors.). Therefore, it follows that a secured creditor may, in order to enforce his rights under Section 13(4), in particular Section 13(4)(a), may take recourse to Section 14 of the Act.

17. Section 17 of the Act which provides for an appeal to the DRT, reads as follows:

"17. Right to appeal.--(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this Chapter, may make an application along with such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken:

Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.

Explanation.--For the removal of doubts it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under sub-section (1) of Section 17. (2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder."

18.The 2002 Rules, enacted under sub-section (1) and clause (b) of sub- section (2) of Section 38 read with sub-sections (4), (10) and (12) of Section 13 of the Act, set down the procedure for enforcing a security interest. Rule 4 of the 2002 Rules deals with the possession of movable assets, whereas Rule 8 deals with the possession of immoveable assets. It is manifest that Rule 4 has no application to the facts of the instant case, as contended by the learned counsel for the State.

19. In Authorised Officer, Indian Overseas Bank & Anr. Vs. Ashok Saw Mill, the main question which fell for determination was whether the DRT would have jurisdiction to consider and adjudicate post Section 13(4) events or whether its scope in terms of Section 17 of the Act will be confined to the stage contemplated under Section 13(4) of the Act? On an examination of the provisions contained in Chapter III of the Act, in particular Sections 13 and 17, this Court, held as under :

"35. In order to prevent misuse of such wide powers and to prevent prejudice being caused to a borrower on account of an error on the part of the banks or financial institutions, certain checks and balances have been introduced in Section 17 which allow any person, including the borrower, aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor, to make an application to the DRT having jurisdiction in the matter within 45 days from the date of such measures having taken for the reliefs indicated in sub- section (3) thereof.

36. The intention of the legislature is, therefore, clear that while the banks and financial institutions have been vested with stringent powers for recovery of their dues, safeguards have also been provided for rectifying any error or wrongful use of such powers by vesting the DRT with authority after conducting an adjudication into the matter to declare any such action invalid and also to restore possession even though possession may have been made over to the transferee.

39. We are unable to agree with or accept the submissions made on behalf of the appellants that the DRT had no jurisdiction to interfere with the action taken by the secured creditor after the stage contemplated under Section 13(4) of the Act. On the other hand, the law is otherwise and it contemplates that the action taken by a secured creditor in terms of Section 13(4) is open to scrutiny and cannot only be set aside but even the status quo ante can be restored by the DRT."

(Emphasis supplied by us)

20.We are in respectful agreement with the above enunciation of law on the point. It is manifest that an action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4), and therefore, the same would fall within the ambit of Section 17(1) of the Act. Thus, the Act itself contemplates an efficacious remedy for the borrower or any person affected by an action under Section 13(4) of the Act, by providing for an appeal before the DRT.

21. In our opinion, therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is well-settled that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person. (See: Sadhana Lodh Vs. National Insurance Co. Ltd. & Anr.; Surya Dev Rai Vs. Ram Chander Rai & Ors.; State Bank of India Vs. Allied Chemical Laboratories & Anr.). In City and Industrial Development Corporation Vs. Dosu Aardeshir Bhiwandiwala & Ors., this Court had observed that:

"The Court while exercising its jurisdiction under Article 226 is duty-bound to consider whether:

(a) adjudication of writ petition involves any complex and disputed questions of facts and whether they can be satisfactorily resolved;

(b) the petition reveals all material facts;

(c) the petitioner has any alternative or effective remedy for the resolution of the dispute;

(d) person invoking the jurisdiction is guilty of unexplained delay and laches;

(e) ex facie barred by any laws of limitation;

(f) grant of relief is against public policy or barred by any valid law; and host of other factors.